The long-term goal of this study is to understand the molecular mechanism by which a Hedgehog (Hh) protein gradient is generated in vertebrates. This information is key to understanding how a single signal elicits multiple responses in a temporally and spatially specific manner in vertebrates. In this regard, a central question in Hh signaling is to understand how a cholesterylated and palmitoylated, and thus membrane-anchored, Hh ligand, travels in the morphogenetic field and generates a protein gradient. This proposal focuses on Sonic hedgehog (Shh), the best characterized mammalian Hh and aims to understand the biogenesis and regulation of a soluble Shh protein complex in Hh-producing cells and how Shh travels in the extracellular space. We propose the following specific aims: 1) Further characterize the soluble Shh protein complex biochemically in order to test the hypothesis that Shh protein complex plays an essential role in Hh signaling. In particular, we aim to identify additional components in the Shh protein complex, including proteins and lipids. 2) Define the role of Dispatched (Disp), a member of the sterol-sensing domain family, in Shh protein complex formation and the requirement of palmitoylation in Disp-mediated Hh protein transport in Hh-producing cells. A cell-based approach utilizing Dz'sp-deficient cells and a genetic approach using knockout mice will be taken to address these issues. 3) Test the hypothesis that heparan sulfate proteoglycans (HSPGs) are dispensable for long-range vertebrate Hh transport and signaling in the extracellular environment but are required for maximal Hh signal transduction in Hh-responsive cells. Similarly, genetic studies utilizing mice deficient in HSPG synthesis and cell-based approaches using cell lines derived from these mice will be taken. These studies will provide new mechanistic insights into how the Hh protein gradient is generated in vertebrates.